tv Street Signs CNBC March 21, 2012 2:00pm-3:00pm EDT
hewlett packard and apple. hewlett packard gets ready to announce it's big move of combining those two divisions. >> big move under meg whitman, the new ceo. >> that will do it for "power lunch." >> "street signs" begins right now. indeed "street signs" does begin right now. i'm brian sullivan, everybody. and we are going to stay hot on housing. we are going around the block with two guests. one with ways he says will really fix the housing market. the other one with some hot housing related picks for your portfolio. and with the oil and gas boom, fracking in the midwest, could america really become the new middle east? your guest says, yes, but only if a few things cooperate. >> hello everybody. the dow trying to avoid a third loss in four sessions. the s&p's sneaking into positive territory for the week. for this midday advance it is still near break-even for the
day. the nasdaq meantime on track for the third straight winning month. it is the strongest during today's session on the major averages and it's also on track to be the best performer for the month of march currently up 4% for march. in other words month-to-date. and check out this stat of the day brought to us by the firm instat. apple is now the world's second largest mobile chip company. by the end of the year it could be the first bumping intel from the top spot. who would have thought. apple is also at another all-time high today. and later we're going to have an apple bear. yeah, we found one. why he thinks the apple boom days might be numbered. in the meantime let's get down to the floors. we have bob and rick. bob, brian was saying a moment ago we're going hard on housing today. i understand some of the building related stocks are also hot today. >> good day to focus on housing. we had existing home sales moderately positive, i'd say continuing a trend here. look at the building material stocks. a new high here usg.
they were able to raise prices, wallboard, 35% and nobody ran away. sales have still been pretty good. margins have improved dramatical dramatically. the home buying season in the spring is looking good, not spectacular. all these building material stocks are up. we also have the home builders moving to the upside. again, anecdotal reports about the spring buying season have been pretty good. overall home builders have been on a tear for a while now over six months on hopes we finally get a decent spring home buying season. and, mandy, i think it's starting to happen. the question is, are these stocks overpriced at this point now that they've already assumed we're getting a good spring buying season? >> that's an absolutely fabulous question we're going to pose to our guest sitting here onset. rick, what's happening in the bond pits? >> even before i walked in an hour before the bond market opens, we already saw the direction of interest rates was lower as we saw europe was exporting some purchases. whether you looked at the gilt
or bund, i vnts said this for a while but my inbox filled with stories about higher rates, italy, spain, cds e-mails i haven't gotten since the greek story disappeared from the front page. so i think we're back in that mode. we are making the low yields of the week in pretty much all maturities. >> okay, rick, thanks very much. >> we begin our full coverage with housing, as promised. as the spring selling season takes off, we have two big pieces of data for you to chew on right now. first up, existing home sales for february 2012, yeah, they dipped a little bit from january's pace, which by the way was revised up. but still february this year came in 8.8% higher than february of 2011. trulia, buying is more affordable than renting in 98 of more than 100 metropolitan areas. my math says that's 98%. we have two gurus to talk about it. we'll talk more about usg and others in a moment.
let's begin with glenn, senior director of the israel center with a new book out fixing the housing market. glenn, you make an interesting comparison in the book to the country to our north, canada. home ownership rates about the same, but canada's housing market holding up much better than ours. one of the takeaways is what we might be able to learn from our neighbors to the north. what is it? >> primarily that the credit analysis and the underwriting standards that were maintained over the last decade were maintained in canada. there was substantial equity put in still maintained there that there was actually related interest skin in the deal for home buyers to actually put in money of 15% to 20%. and our numbers dropped off in terms of that type of capital structure for home mortgages and the underwriting associated with them, which was mistakenly done. >> the way they handled delinquencies and foreclosures,
you also note has maybe contributed to their market holding up better than ours, has it not? >> correct. they've been able to maintain that. they've been able to maintain structured finance issuance related to mortgage-backed securities and to other types of instruments that maintain a more robust capital structure and provision into the housing market. we've posted $1.1 trillion of mortgages under the balance sheet of the govent sponsored enterprises of fannie mae and freddie mac. and we've also retreated enormously from the private sector's involvement in the market. >> what do you think is the biggest takeaway then you think we can learn at the moment? >> primarily the necessity to reboot securitization, to reboot structured finance, to reboot the types of credit analysis and the types of underwritings that are more critical to maintain the integrity of the market. >> you know, also, there's a graph on page 52 or thereabouts where you show mortgages
outstanding as a percentage of gdp. this might be sticky territory because we hear it's the american dream. do too many people own homes in america? >> not necessarily. i think we've had a huge success in extending home ownership. we maybe have not done substantial amount in terms of providing similar types of subsidies into the rental market. >> glenn, let me interrupt to ask in a different way. i should have asked our team to make it. that was my bad. shows mortgages and percentages of gdp spiking the last 20 years. has housing become too important to the u.s. economy? >> well, it's 30% of household wealth in the company. that's a substantial amount. if you have a reduction in the price of housing as we've experienced 40% in real terms in terms of price reduction, that has a contracting effect upon aggregate demand which has a very negative effect on the macro economy. it's been a substantial part of it. we will not have a robust
recovery or sustainable robust recovery without more of a recovery and return of private capital into the housing market. >> glenn, some fantastic kmen comments there. i want to bring bob in now. picking up from where bob pisani left off where he was talking about incredible run with the building related and housing related stocks have had, for example, since october, they're expecting quite a rebound if you look at the rebound in the stock price. are they overpriced now? >> home builders building products both sectors have fully participated in the big move in the s&p since the start of the year. that's obvious. what we're seeing at the ground level is high expectations are being confirmed, accelerating traffic. we're very confident that the spring selling season's going to be a big hit. we think we're at the start of a multi-year bull market in the housing industry. >> so you think these price gains are warranted then? >> undoubtedly. we're looking now at a baseline of 107,000 housing starts. if unemployment goes down, you
have a great set up for stocks. >> that's a nice assumption, unemployment at 8%, 700,000 housing starts. what if we don't get one or both of those things? >> it's not whether it's going to happen, brian. it's a question of pace. we have a great setup for the sector right now. there's a lot of lofty expectations built in, but we still think there's a lot of upside in some of the builders. >> let me follow-up on that. i want to give you credit. you made a good call on usg back in september. >> thank you again for the opportunity. >> glenn, we'll see you soon, see you at the conference by the way. >> take care. >> how was that? that was smooth. >> very smooth. >> you made a good call on usg up 67% since that call. when i see with all due respect a boring company like a sheet rock maker up 67%, to mandy's point we think how much more room to run can there be? >> a lot. >> how? justify that? >> they're not expecting too much. >> it's not a cloud computer.
a sheet rock maker. >> how many times since the bottom we're in the phase of a housing rebound and we take a step back and then looking at a double bottom, triple bottom. >> look at it this way. what's going on with usg is a pure call on usg. i'm a stock guy looking at what moves the price. prices are up for wallboard. first time in a number of years everybody working together to keep price discipline in the industry. it's up 20% year over year. huge flow for all the wallboard makers and usg is the market leader, great management team, stock's going to keep moving up. >> those are your picks. we had them on the board a moment ago. bob, thank you for joining us. >> thanks so much. >> thank you, glenn, again. before we hit the break, we have to check out priceline.com. the stock soaring past $700 a share. you heard us battle it out in our stock brawl yesterday. the bulls a $750 target on the stock. priceline now up 50% year-to-date. it's really big. it's a big company now. >> it is a big company. in fact, market cap is now
bigger than all the airlines combi combined. we were talking yesterday with our guests and one saying it has nearly $3.57 billion in cash. could buy a couple airlines. >> buy american airlines, have $300.3 billion leftover. >> i think the other guest also said the stock is very highly correlated with the direction of the euro, so where the euro goes, so does its stock. obviously not necessarily out of the woods for the eurozone. up next, the gang at goldman sachs telling investors that now is a once in a lifetime opportunity to buy stocks. we'll find out if our big money man around $17 million under management agrees. and could america become the new middle east? new report says the u.s. has the fastest growing oil and gas production in the world. so we'll have a drill, drill, drill debate coming up when "street signs" returns.
the tooth paste and bleach boom continues. colgate-palmolive at a high. began trading on the new york stock exchange in 1930. that, my friends, is an all-time high. >> goldman sachs making a huge call today saying now is a once in a lifetime opportunity to buy stocks. their main argument is after a 20-year period of relative underperformance versus bonds, stocks are now underpriced against fixed income especially when you look at dividend yield. in other words, now is the time to buy stocks.
the ceo and cio has over $3 billion under management. what's your take on that very bold call, dan? >> well, mandy, i think from a long-term perspective, i think that they're right. i mean, when you look at the competitive landscape out there clearly stocks and even focusing more on domestic stocks, it's not the only game in town, but it's probably the best game in town. we're in a situation to where we're clearly tracking earnings. this market has been very consistent frankly the last three years that every time we drop down to about a 12 to 12.5 p/e, the market rallies. and every time we start to bump up against 14, it stalls and waits for earnings to catch up. even though the longer term trend the stock will be the asset class compare today bonds in particular, i think we'll have a little bit of treading water near-term just because we've been in a huge sprint. we're up 12% since the beginning of the year. we've had a full multiple point expansion now to about 13.5.
and so we pretty well have already realized a lot of what we should have had in 2011. and part of 2012. so we may be back end loaded with regards to additional return this year. when you look at the next three years, clearly stronger performing. >> which individual stocks would you look at? >> i think you have to continue to look at technology. that's the horse that largely has brought you here. they're the people that are producing. we're still at the beginning of the capital replacement cycle. and clearly companies are going to continue to use technology as a replacement for labor before they re-employ. i think one of the big standouts there is google. i think google, again, you're looking at still a very strong earnings trend compared to the movement you've seen in apple and some of the others, you're still trading about a 13 p/e. so i think it's still very attractive where it is. i think the energy sector also, you can't ignore. i'm a little concerned about some of the big integrated oil companies we've seen significant moves there. i think maybe the support
companies and the -- especially the drilling companies as drilling activity picks up, one of the strong companies there is drill quip. >> right. >> it's not as well known, but we see more activity pick up in the gulf of mexico, mexico, brazil, nigeria, they do a lot of sub surface structuring. they're going to be a major beneficiary. >> okay. >> on the consumer side, i think you've got a real steady stock with target. >> absolutely. thank you so much for joining us. >> thank you. >> from the buying opportunity of a lifetime for the whole market to a stock that has already been out of this world, cno financial hit hard during the financial crisis. remember those problems? totally different story now. the stock is up more than 2,000% over the past three years. yes, 2,000%. even hedge fund titan heavily invested in this name. let's talk to randy. our viewers, a lot of them, they remember the disaster that was
con se co. cno up 2,000% some in a couple years. why? and where is this going? that is out of this world and some would say outrageous. >> sure. the story of cno recovering that much in that time period really stems from what happened during the financial crisis. they are still and we're a below investment grade issuer and at a time when the capital markets shut down, they did not have enough cash on hand to settle a 2010 debt maturitmaturity. at the same time they had been improving their fundamental business trends. and as the market opened up and then as paulson and others came in with the recap in late '09, it set the stage for the stock to continue to recover. >> it sounds as if it wasn't necessarily fundamentally a bad company, just suffering during the financial crisis. from here considering you have an outperform rating and considering the run it's already had, what is the market not yet appreciating about this company? >> sure. you're absolutely right.
the first few hundred percent under your goals here were because of the capital markets. but this is a unique business. it's focused on middle american retirees selling life and health products. it's an underpenetrated market. most life insurers go after more affluent americans. even though the stock is up this much, it's still only 50% of book and around 7 or 8 times cash eps. one of the things they have besides valuation is a very strong capital management program. their cash flow per year is about $200 million. and that's going towards share buybacks, delevering on debt and also utilizing their nol which is a good way to not pay taxes. >> quickly i referenced paulson for reasons. getting to spin-off the annuity business. he's a big owner of cno. i think the two things are a little too similar to not be connected. what's paulson's role with
hartford and cno? >> paulson made a long bet on financials, 25% economic owner in cno and on the board. hartford was another way to play that. under 10% ownership there. life insurers are late to the recovery. this group still trades 90% of book value and 7 or 8 times earnings. so i have a broadly favorable bias on the group. i have a buy on cno. i have a buy on hartford. >> thanks for explaining that, randy. thanks for coming on "street signs." >> thank you. >> coming up, why investors in nsg are cheering reports to the death of linsanity greatly exaggerated and there's a new twist to the feel good saga. "street signs" back shortly. and what would a day be without a little angry herb? this time an old one but a good one. get ready for a green mountain eruption. >> i want to play that game.
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starbucks coffee will be available on its new brewer. starbucks is pretty flat today, but the ceo, howard schultz, confirmed the green mountain news at the annual meeting. we'll also get a first look at starbucks' new brewing machine. have you tried it? it looks pretty neat and slender. doesn't look like it will compete directly because it's single serve espresso. demonstrated at the shareholder meeting in seattle just moments ago. this is good news i think for starbucks and for green mountain as far as strategic partnership which has been expanded like you mentioned in the intro. also getting into the energy drink market. we're going to talk a little bit about this with the refresher drinks. it's unroasted green mountain coffee extract combined with fruit juice. interesting. i'm not sure how well this will go over. you can apparently customize it at 16 locations in the u.s. and canada starting in july. >> all right. anyway, i was supposed to talk about this a little more? all right.
i don't know what's going on. i'm just sitting up here. wait, i want to ask another question about this. i want to make sure we have time. all right. so slender, whatever, fine. what have we heard competitively about this thing though? it's nice, neat, whatever, is this going to kill -- >> starbucks thinks this espresso, this single serve espresso market is worth a fairly significant percentage of the single cup coffee market, which is growing, we all know. that's very popular. so starbucks is hoping to capture this espresso market segmentation of the single serve. will it work? i don't know. they're not out until fall. >> howard is going to be on "closing bell," what would you ask him if you had one question to ask, herb? >> i would ask him how much is he willing to compete with green mountain. one point to be heard this new machine while it's going to be espresso, you put the angry herbs up there. >> i love that.
a point that must be herb. >> are you haangry herb? >> unroll your scroll. >> let me explain. this is important. the new machine is going to also do brewing of regular coffee. that's what they said. they down played it but it's very significant event here because you're going into a higher price point. i also think it's important to note that the espresso machine they're coming out with, green mountain itself intends to create its own espresso machine. as i write on cnbc.com as i've said on air before, an italian coffee company actually selling their shares of green mountain, which is very interesting and a side story in its own right. so you have the dynamics of this entire industry moving forward. starbucks is in the business of selling coffee. they're going to sell coffee. and this whole deal what's the economics of the deal? i keep saying that. we don't know. all we can assume is starbucks got a great deal. as it applies by the way to starbucks and the energy drinks, the first thing many people want
to look at is how is this going to effect monster? the old hansen natural now monster beverage. >> why doesn't anybody talk about the environmental angle? i'm not a green dude. i'm not -- >> that really bothers me as well. >> at the same point -- the whole industry will face a backlash. >> they already have. starbucks went to green mountain and said they want them to work on a recyclable product on this. >> exactly. get rid of the plastic containers. to reiterate, howard schultz is going to be on "closing bell" today. everybody do stay tuned for that. in the meantime, happy birthday twitter. it's today the first ever tweet. there are now 340 million tweets a day with 140 million active twitter users every single month. and don't forget you can actually tweet us. we're all on twitter, mandy and sully and @herb greenberg.
>> do you get as much hate mail as i do? >> some. >> if you dare say anything negative about apple, boy people come out of the wood work. >> but they worship at the temple of apple. >> a billion positive apple stories, the one negative story you just get -- >> we have an apple bear coming up on the show. we've got lots of bulls out there, but next. >> i want to see more of the video. >> that's a great video.
little bit of breaking news about the elusive zynga presser. it will be about an acquisition of omp. roughly $200 million is the acquisition price. our sources have confirmed now this is zynga's biggest acquisition and first acquisition since it went public last year. you would expect to see this disclosed rather shortly as far as s.e.c. filings is concerned. we'll have more for you on that. you can see shares are up just
about 5.5% on the expectation of that news. we'll have more for you guys as that presser gets underway in just a little bit. mandy. >> indeed we will. thank you very much, kayla tausche. in the meantime 90 minutes left in the trading day. so what is the street talking about? well, the dow is really at this moment trying to avoid a third loss in four sessions. do check out the stocks on the move for example home depot the big winner on the dow today up about 1% right now. you heard us talk about priceline as well earlier, but check out expedia. it's also moving up in this fairly mixed market. and we have to also check out what's in pharmaceuticals seeing a huge pop today seeing 8% to the upside. and in the meantime the final oil trades started to come in. why don't we check out what's happening in the oil pits with sharon epperson at the nymex. hey, sharon. >> hey, mandy. there's a great deal of anticipation about what's going to happen tomorrow in oklahoma. that is where president obama will be. and that is where the key
delivery point is for wti oil futures. and we're settling right now up about $1 on anticipation of what may come out of his remarks from curbing. we already know supplies were down, the first decline we've seen in four weeks. there's plenty of supply there, but he's already supported the keystone pipeline's southern leg to texas. there's rumor that he might fast track that. of course the white house today saying he's definitely very supportive of that proposed leg 700,000 per barrels a day taken out of that down to texas. that's what we're waiting to hear from. that's something that has moved the markets a bit here. we haven't seen as big a move in brent and that let's you know there's something specific to the wti contract traders like today. and continuing to want that spread to come in even though we are seeing oil prices relatively in a tight range. back to you. >> okay. thank you very much, sharon epperson. >> staying with energy. could north america become the new middle east of energy?
there's a new note out today from citi group. the u.s. has become the fastest oil producing country in the world. and the hayday of saudi could be coming to an end, only if washington plays nicely. joining us now larry kudlow, i put that if in the intro for a reason because production on federal lands is decreasing and the government needs money. why not sell federal lands and open for drilling? >> because they don't have a brain in their heads. that's the whole problem. there's an explosion of oil and gas fracking, but that's all coming from private lands and private entrepreneurs. oil and gas from federal lands is down 10%, 12%, 13% in the last year. some of this stuff at nine-year lows. take the handcuffs off. you'll see a tremendous gusher of oil and gas. and here's the point.
there's an economic growth model of energy, okay. the energy will create jobs. it will create expansion of gdp. it spills over into a million different areas. it will throw off royalty revenues to bounce the federal budget. this is sort of a supply side energy model of growth. if only washington would take the cuffs off. >> andy, do you agree with the citi note that the north american continent is essentially becoming the new middle east in terms of production? and to what extent is it going to reduce our reliance on foreign oil and hopefully bring prices down? >> well, i do agree with the citi note. and you can see it as larry pointed out with private land, drilling and production is going up especially in states like north dakota as well as texas and throughout the mid-continent. the good news is that the more we produce, the world needs the oil in a growing demand environment, so it helps the u.s., it reduces our imports and adds to supply mitigating price
increases. >> andy is right. let me add one thing. we need infrastructure. this keystone pipeline story is very important. now, it is rumored, i think nbc news is reporting, that tomorrow the president is going to say some kind of fast track permitting for keystone. the lower half of keystone, not the international canadian side. he should have done the whole pipeline three years ago when it first passed the environmental review from the state department. if we had pipes coming from cushing to the gulf coast, gasoline would have reached refiners faster, they wouldn't have had to go overseas for more expensive oil to refine, they'd be more profitable. and frankly the price of gasoline would be lower. >> i want to just make it clear for the viewers on the keystone issue, this has been the pipeline coming from canada hopefully down through the central part of the u.s. a lot completed, it's been a political hot button issue. andy, do you agree with larry?
domestically it's fine, internationally it's fine, i think larry's probably suggested too that if this thing does not get done, all the producers in canada are going to be like, okay, america, we're just going to make the pipeline go west of vancouver and ship the oil and gas, whatever over to china. >> well, that's exactly right. and you actually see it in the chinese investment spending billions of dollars buying natural resources in canada. there's no doubt in my mind that you're seeing potential pipeline expansion down to vancouver. in fact, it could come on stream in a couple of years as well as what's known as the em bridge northern gateway to western canada. and not only that we can reverse pipelines that go out the eastern canada side. maybe that's not as economic, but the fact is that canada is not going to place all its bets with the u.s. anymore really over this transcanada issue. >> i want to know, though, a lot of oil executives are up in arms about this, andy. and putting a lot of pressure on obama to go the full approval as opposed to the partial approval.
what are the chances that their pressure might actually work? or are we going to have to wait until, for example, after the election? >> i think you have to wait until after the election and really that's the bottom line. no matter how much pressure the executives put on it. transcanada was planning to build this leg first. so i expect that as that goes forward we'll see that completed by the end of next year. but the canadian leg is still a couple of years away, early 2015. >> there may be another vote in congress about this. in the senate, for example, the pipeline supporters got 56 votes. they had two others in reserve. they need two others to get it passed. but, look, the lower half, the president should get the epa. we don't need a presidential deal right now. there's no international story. this is the lower half going from oklahoma down to the gulf. it needs an epa review quickly so at least you can send a signal and at least the keystone
peop start moving this thing and tell other pipeline builders it's okay. tell the truckers it's okay. tell the pipe fitters it's okay. in other words, this is like a governor giving a fishing license. that's how easy this should be. if only he would do it. >> larry, here's what drives me absolutely insane, okay, is that with all due respect to the administration, we've got this amazing boom industry possibility. it's already growing. we've seen 2% in employment in north dakota. there are problems associated with the growth, but it's booming. then we'll have labor secretary on cnbc and she'll talk about clean tech and clean energy. while we're watching the solyndra problems of the world -- i'm not saying clean energy doesn't have a role. it does. we should use everything available, wind, saw, whatever, why doesn't the administration give a little more attention to this? is it just playing to the one side the environmental left? >> yes. they are playing to the environmental left, unfortunately. that's where the president's heart is. and, you know, market forces
should be allowed to take hold. take the regulatory cuffs off. don't run around the country bashing oil and gas companies and telling everybody how they have to have tax hikes for depreciation schedules that every manufacturer has, for even sakes. don't blame oil and gas. let the marketplace work. the ed morris note from citi bank suggested by 2020, i think or something, we could create 3.6 million new jobs. that is a staggering number. that's the energy industry and the various multipliers for that. in other words, this is not only about energy and oil and gas and gasoline. this is about economic growth. this is about high-paying job creation. and it's also about balancing the federal budget. the revenues will come in at current tax rates. and the royalties will spur more revenues. this is win-win-win. if only the white house would open its eyes. >> okay. thanks very much, larry and andy. just a moment ago we were showing you live pictures of president obama landing in las
vegas. is his surprise support for the keystone pipeline politics or pandering? catch the show tonight at 7:00 p.m. eastern on cnbc. >> up next they say age is just a number. but you're about to see why it is the number at least when it comes to your retirement portfolio. >> and running out of ammo? we found someone ready to make the bear case. >> do you dare make the bear case on apple? >> i dare. i dare. >> you must be short the stock. slip-on's the way to go. more people do that, security would be like -- there's no charge for the bag. thanks. i know a quiet little place where we can get some work done. there's a three-prong plug. i have club passes. [ male announcer ] get the mileage card with special perks on united, like a free checked bag, united club passes, and priority boarding. thanks. ♪ okay. what's your secret? [ male announcer ] the united mileageplus explorer card. get it and you're in.
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coming up on "closing bell," gasoline prices keep heading higher. we've got the trade on how higher prices at the pump can help pump up your portfolio. plus, how are plunging coffee prices impacting starbucks' bottom line? we'll ask the chairman and ceo, howard schultz. and we'll take the pulse of the commercial real estate industry in an exclusive interview with starwood capital ceo. first, more "street signs" coming up right now with mandy. >> okay, ross, thank you very much. and brian, by the way. they say age is nothing but a number. but when it comes to retirement, it is the number. it is the mandy and brian show
with some herb sprinkled in. don't worry. vanguard says more americans opting for target rate funds based on a person's estimated retirement date. we're talking about a six-fold increase in just five years. joining us is the director of the vanguard center for retirement research. steve, this is explosive growth. is it a good thing? >> mandy, i think it is. you know, for many years we were worried that workers really struggled with the idea of building a portfolio from the building blocks that were given to them in thundershower 401 k plans. >> does it reduce the return as well? >> what you do see is individuals are in more balanced strategies so you see younger people more equity-oriented and as they approach retirement they get lower risk and lower returns. but, again, lower return is
relative to having a diversified portfolio. >> you know, listen, there's no doubt that these can be very useful to people that have busy lives and busy families. don't have time to sit and analyze their portfolios all the time. when i look through target date funds for example the 60 to 64-year-old fund which is in retirement or close to it, it's still 56% stocks. a lot of financial advisors say it's too much risk and the 19-year-old product is not 100% stocks, it's about 90%. how do you determine what the proper balance is? a lot of people would disagree with those percentages. >> sure. i think the real issue is that employers and fouk thai won't spend that money in the first few years of retirement and spending that over several decades and they have to think about inflation during retirement as well and rising cost of living. it's really that sort of
strategy that drives the lower allocation -- the 50/50 allocation for the pre-retiree. and for younger people the recognition you should never have all your eggs in a basket even though some believe it should be 100% stocks. >> steve, thank you for coming on and explaining that to us. >> herb is back with his disaser du jour of the day. this is pi cream. >> the company came out with earnings that looked really good. cramer goading me saying i must be in my pajamas. he said that looked like a great number. i took a look while i was exercising on my elliptical and then my desk and got me going and there are a lot of moving parts to this number. one analyst came out and downgraded because he said the stock had run a lot. it really ran a lot starting about this time yesterday going into the earnings, which is very interesting. but i think it's a story that certainly needs to be taken a look at a little more. i know i want to look at it more because it's an old story from
the old days where there are other issues when the company sort of got into the mess. >> how long is the old days? >> about four years ago. a lot of controversy around the company. since then they've tried to turn around and cut back. >> this is the hottest growth stock maybe nontech for a long time until it utterly collapsed like a bad jenga game. >> for a variety of reasons people want to forget especially those who used to be associated with the company. >> sunshine time. ticker asgn is up 20% trading at a level not seen in a decade. the firm's pop comes on news it's going to buy privately held apex systems. the stock is up 57% year-to-date. now, that is what i call sunshine. also, if you have a lot of friends on facebook, you aren't going to like this. a new study by western illinois study shows a link between facebook and narcissism. i could have told you that. people who had high scores on narcissism personality survey spent more time on their facebook feed and had more facebook friends.
these so-called narcissists also reacted aggressively to negative comments made about them on their facebook wall. and they also change their profile pictures more often. i can safely say i don't do facebook. >> can i weigh in here? brian has a new picture on his twitter feed. >> you do change it fairly regularly, sully. >> i like the picture because somebody told me it was so low res that when you opened it i looked like a monet. i was all pixel ated. wear suits all the time, makeup, all this hair spray in. >> that picture was from your holiday. you had a bit of a going. how big did it get by the end of the week? the full ned kelly. >> i don't know who ned kelly is. >> australians would know. >> i know who he is. i'm teasing. i'm fine. but it's nice to relax and not shower for eight or nine days and have a good time. >> interesting. >> up next. >> linsanity is not dead yet.
an airline has planes... and people. and the planes can seem the same so, it comes down to the people. because, bad weather the price of oil those are every airlines reality. and solutions won't come from 500 tons of metal and a paint job. they'll come from people. delta people. who made us one of the biggest airlines in the world. and then decided that wasn't enough.
>> linsanity lives. a tour begins. he plays basketball and 18 points and just three turnovers, the knicks are under a three-game winning streak under their new coach. >> shares are of a pel are hitting another record high. the stock has gone from 500 to $600 in just one month. is this meteoric rise is bubble about to burst? joining us is robert head of research. good to have you with us.
very brave man. did you just turn bearish? >> no, apple is a great success story of american capitalism, i should say. now it's becoming a victim of its own success. because the market cap has become so large that it's about to bump up against the 5% limit of the s&p 500. >> in terms of what? >> the entire s&p 500 is starting to approach 5% of it. so 5% is usually the single stock limit at institutional investors can hold in one stock in their portfolio. mutual funds specifically like fidelity, numerous other mutual funds have a 5% limit and then
suddenly a group of sellers haven't been there yet. >> fair enough. but i'll go the other side of that argument. which is, i understand your argument about the index funds. when i look at 13 f-filings for the hedge quarter, apple, apple, apple. why do you not think there are going to be willing buyers, when those sellers -- aren't there plenty of apple buyers out there? it's less than a two-point valuation premium to microsoft. >> well, you know, hedge funds, even though we talk about them all the time, they are a small sliver of the group of people who own the stock. 75% of the owners are mutual funds, trust endowments. >> exactly. but won't the pension funds come back in a little more aggressively because it's paying 2.65 per dividend because those
funds looking for annuity-like cash payouts, won't they also come in? >> believe it or not, a lot of dividend funds own apple stock but they are still beholden to the 5% limit. my thing is this, it's not an insulated event. it comes in conjunction with a parabolic rise in the stock last month. what you see here, technically it's a thrust. it's a blow-off top. basically the most irrational investors, those chasing apple at the top have been climbing into the stock. there are hardly any sellers and suddenly a wave of selling appears because suddenly they are 5% and hedge funds run through the door because they don't want to see their gains being ee vab rated. >> let's put the argument aside for a second. do you see sales growth momentum slowing down? >> what we're referring to is what we call the large numbers, which is apple.
it's now reaching -- it's projected to reach $200 billion sales level next year. then it becomes a very exclusive club like 5 or 6 companies worldwide that are generating sales of $200 billion. those are exxon, car companies. so as it reaches a 200 billion, can it still maintain -- >> steve wozniak thinks so. he's not a stock prognosticator. he thought apple could go to $1,000 a share. >> and he's not the only one. >> he holds the stock. >> that's why i said that. obviously he has a vested interest but he mentioned the possibility of apple tv as a new growth driver. they have always surprised, at least the last decade. >> but every time a stock hits the 5% level, whether it's exxon, g.e., microsoft, the sellers come in and that's the cap. >> when it gets to that level,
if it does, we'll talk more about it. we'll see what happens. thanks. up next, the blow without recovery. stick around to find out oh more. [ female announcer ] it's time for the annual shareholders meeting. ♪ there'll be the usual presentations on research. and development. some new members of the team will be introduced. the chairman emeritus will distribute his usual wisdom. and you? well, you're the chief life officer. you just need the right professional to help you take charge. ♪